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Friday, May 4, 2012

Global markets are heading lower after disappointing US jobs figures

European markets drop 1% after non-farm payrolls miss forecasts, while Dow falls 75 points.Investors were already showing some caution after poor European service sector survey results, but news that the US economy had added 115,000 jobs in April compared to expectations of a 160,000 rise has seen the falls accelerate. The non-farm payroll survey did show February and March figures were revised upwards by 53,000, and the unemployment rate fell from 8.2% to 8.1%, but this was not enough to calm nerves. The week has seen a number of disappointing economic figures from the eurozone and US, and investors had hoped the non-farm payrolls would give some comfort that the world's biggest economy may avoid a major slowdown.

But the actual outcome gave no such assurance, and the Dow Jones Industrial Average has fallen around 75 points in early trading. The FTSE 100 is down 75.75 points at 5690.8, while both Germany's Dax and France's Cac have each fallen around 1.4%. On the US jobs, Rob Carnell of ING Bank said:

On balance, this remains a very soft report, and by now, we should be seeing the distortions from the first quarter due to unseasonal weather dropping out. Better news may lie ahead, given the sharp drop in initial jobless claims yesterday. But investors will be watching US labour market data even more intently, for signs the US is also slipping back into recession. More of this, and we might even see QE3 beginning to be brought back as an option, though we are still a way off this yet.

Ahead of the weekend's Greek and French elections and the forthcoming bank holiday in the UK, investors seem unwilling to take any gambles as the trading week ends. Joshua Raymond, market strategist at City Index, said:

It would not be a surprise if positions were reduced into the UK close as a means of value protection by UK investors ahead of the long weekend away from the markets, and this could exacerbate the payrolls reaction somewhat.